Is it possible to pay monies out to a worker to end the employment relationship instead of giving notice?

Employment & Labour Law

United Kingdom Small Flag United Kingdom

Yes, provided the employer has included a right to make such a payment, which is known as a payment in lieu of notice, in the contract of employment. If no right is included in the contract of employment, the termination of employment will still be valid but it will be in breach of the contract terms. In such circumstances the notice monies are treated as compensation for the contractual breach. Currently, there are some tax advantages to this approach, but these will no longer apply from April 2018. Many employers prefer to rely on an express right to make a payment in lieu of notice, because if the contract is terminated in breach, the employer may not be able to enforce other provisions that would otherwise have survived its termination. For example, post-termination covenants restricting an individual’s involvement with certain clients and types of work, and obligations to protect confidential information.

Ireland Small Flag Ireland

Yes. When included in an employment contract, a PILON clause (pay in lieu of notice) provides an employer with the right to make a payment to an employee in lieu of the employee working for either some or all of the duration of the notice period. If not provided for as a matter of contract, a PILON provision may be agreed between the parties prior to and at the point of termination. However, if agreement is not reached, an employee is legally entitled to work out their notice period, and to challenge any purported termination that does not permit them to do so.

Singapore Small Flag Singapore

Yes, it is generally possible although much would depend on the terms of the employment agreement. It would be advisable for the employer to clearly set out its right to pay salary in lieu of notice in the employment agreement.

United States Small Flag United States

Due to the at-will nature of most employment relationships, either the employer or the employee may terminate the employment relationship at any time, for any reason or no reason at all, without providing notice, unless otherwise agreed. Although the WARN Act requires a 60 day notice period, nothing under the Act specifically requires employers to continue to employ affected employees during the 60 day notice period. Consequently, employers may opt for “payment in lieu” of providing WARN notice as long as they properly value the 60 day period, including all compensation and benefits. Failure to properly compensate affected employees under WARN may result in litigation, attorney’s fees, and civil penalties.

Where the parties to an employment agreement have agreed to a notice period, they may also contractually agree to payment of money to a worker in lieu of a notice of termination.

Spain Small Flag Spain

Yes, it is possible. As mentioned before, the employer may choose to fully or partially replace prior notice with payment in lieu of notice.

Turkey Small Flag Turkey

Turkish Law allows the employer to terminate the employment agreement with immediate effect by making payment of the salary corresponding to the applicable notice period (even in the absence of just cause).

Switzerland Small Flag Switzerland

In principle, it is possible to terminate an employment by mutual consent instead of an unilateral termination by the employer. One has to be aware, though, that such termination agreements must not be concluded in order to circumvent provisions which safeguard the interests of the employee (eg provisions protecting employees incapacitated for work due to illness; there is no circumvention if such employee has an own interest in concluding a termination agreement, however) and must comply with mandatory provisions of labour law and collective agreements. If there is no adequate balance of the employer’s and the employee’s (in particular financial) interests, respective termination agreements are deemed null and void.

Japan Small Flag Japan

Yes, the employer may make a payment equivalent of 30 days’ salary in lieu of notice. The employer may also shorten the notice period by making a payment equivalent to salary for the days reduced from such notice period (Article 20, paragraph 2 of the Labour Standards Act).

Thailand Small Flag Thailand

Yes, in the case where an employer would like the employment to be terminated with immediate effect, the employer is entitled to make payment in lieu of advance notice.

India Small Flag India

Yes, it is possible to pay wages in lieu of the notice period in order to end the employment.

Uruguay Small Flag Uruguay

As referred in question number 4, there is no minimum notice period required to terminate employment. Consequently, the option of garden leave as to place the employees during the notice period to restrain them from communicating information to competitors or using company resources for other employers, it is not applicable in our country.

UAE Small Flag UAE

An employee cannot be paid in lieu of notice. Even if the employee will not be required to work during the notice period, the calculation of the employee’s termination benefits must still treat the final date of the notice period as the final day of service. The 30 day notice period can be extended but it cannot be waived or reduced.

China Small Flag China

The employer may pay one-month’s salary in lieu of notice to the employee when it has right to unilaterally terminate without fault (see question 1).

Sweden Small Flag Sweden

The provisions in the EPA regarding termination and notice periods are mandatory. However, the employer and the employee may agree to terminate the employment by mutual agreement where the employee normally agrees to end his employment against compensation.

South Korea Small Flag South Korea

Under the LSA, an employer intending to dismiss an employee is generally required to serve a minimum of 30 days’ prior notice. Instead of giving 30 days’ notice, the employer may opt to pay 30 days’ ordinary wage and bring the contract to an immediate end.

France Small Flag France

The employer may decide to put the dismissed employee on garden leave, with maintained pay and benefits in kind (e.g., company car), until the end of the notice period.

Austria Small Flag Austria

Yes; Austrian law allows pay in lieu of notice, but this will only be valid if agreed upon by both parties.

Canada Small Flag Canada

Yes. Legislative and common law (and, in Québec, civil law) notice periods can be satisfied by providing the employee with wages, compensation and benefits continuation instead of the applicable advance working notice.

Some jurisdictions also require an employer to pay statutory severance pay in addition to providing notice of termination. For example:

  • Ontario: Employers with an annual Ontario payroll of at least $2.5 million must provide employees who have five or more years of service with statutory severance pay equal to one week’s pay per year of service, up to a maximum of 26 weeks.
  • Federal: Employers must provide employees who have at least 12 months of service with statutory severance pay equal to the greater of (a) two days’ pay for each completed year of service or (b) five days’ pay.

Belgium Small Flag Belgium

Instead of terminating the employment contract by serving notice on the worker (thereby allowing him/her to continue working during the notice period), the employer can terminate the employment contract with immediate effect, upon payment of a severance pay.

Such severance pay is equal to the remuneration and benefits that would have been paid during the applicable notice period (see questions 4 and 15).

Italy Small Flag Italy

Yes, the employer can pay monies out to a worker to end the employment relationship instead of giving notice. This is commonly done in some cases (e.g. the termination of the executives) as there is the risk that the employee falls sick, thus suspending the laps of the notice period.

In fact, according to Italian Labour Law, during sickness the employees are entitled to keep their job position for the maximum duration provided by the NCBA, during which their salary is paid partly by INPS (the National Social Security Body) and partly by the employer.

This means that the dismissal would be effective only when the sickness period ends.

Luxembourg Small Flag Luxembourg

Luxembourg law does not provide for payment in lieu of notice. The employer may however decide to release the dismissed employee from the obligation to work during the notice period but the employment contract will terminate at the expiry of the notice period.

Germany Small Flag Germany

Generally, that is not possible. A notice period needs to be considered in any case of an ordinary dismissal. However, the employment relationship can be terminated (with immediate effect) by mutual agreement. In this case, the written termination agreement mostly contains severance pay.

Mexico Small Flag Mexico

Given that there is no need to provide prior notice, it is not common in Mexico to offer additional compensation.

Finland Small Flag Finland

Yes, payment of the notice period in lieu is possible.

Updated: June 12, 2017